ILLINOIS OFFICIAL REPORTS

[Pages:39]ILLINOIS OFFICIAL REPORTS

Appellate Court

Parkway Bank & Trust Co. v. Korzen, 2013 IL App (1st) 130380

Appellate Court Caption

PARKWAY BANK AND TRUST COMPANY, Plaintiff-Appellee, v. VICTOR KORZEN and TOMAS ZANZOLA, Defendants-Appellants (Unknown Owners and Nonrecord Claimants, Defendants).

District & No.

First District, First Division Docket No. 1-13-0380

Opinion filed Supplemental opinion filed Rehearing denied

September 23, 2013

December 16, 2013 January 15, 2014

Held

(Note: This syllabus constitutes no part of the opinion of the court but has been prepared by the Reporter of Decisions for the convenience of the reader.)

In a groundless appeal from a foreclosure proceeding involving frivolous and confusing pleadings and procedures by defendants with respect to their vacant lot, the appellate court affirmed the judgment for plaintiff, recognized plaintiff's right to petition for attorney fees, and directed defendants to show cause why a fine of $10,000 should not be imposed on them pursuant to Supreme Court Rule 375.

Decision Under Review

Appeal from the Circuit Court of Cook County, No. 10-CH-36958; the Hon. Robert Senechalle, Judge, presiding.

Judgment

Affirmed.

Counsel on Appeal

Panel

Victor Korzen and Tomas Zanzola, both of Chicago, appellants pro se.

Scott & Kraus, of Chicago (Eugene S. Kraus and Sonia S. Kinra, of counsel), for appellee.

JUSTICE DELORT delivered the judgment of the court, with opinion. Presiding Justice Connors and Justice Cunningham concurred in the judgment and opinion.

OPINION

? 1

This appeal of a mortgage foreclosure case involving an empty lot is so groundless that

we would normally dispose of it with a brief summary order. However, it provides us an

opportunity to review a number of tactics a small number of debtors use both to delay the

ultimate resolution of cases against them and to use the legal system for improper purposes.

Some people might classify those who engage in these tactics as "sovereign citizens," but

regardless of the nomenclature, their methods are not only counterproductive, but detrimental

to the efficient and fair administration of justice. A recent New York Times article noted the

FBI has labeled the strategy as " `paper terrorism.' " Erica Goode, In Paper War, Floor of

Liens Is the Weapon, N.Y. Times, Aug. 23, 2013, at A1.

? 2

Because of the growing number of these cases, we issue this opinion to provide guidance

to the many courts confronted with similar matters.1 We affirm the judgment below and

retain jurisdiction to award additional attorney fees as provided by the underlying contract

and to consider the imposition of sanctions under Illinois Supreme Court Rule 375 (Ill. S. Ct.

R. 375 (eff. Feb. 1, 1994)).

? 3

BACKGROUND

? 4

Defendants-appellants, Victor Korzen and Tomas Zanzola, who are the owners of the

subject property, raise no less than 15 points in their pro se appeal. Establishing a framework

to properly analyze these contentions requires us to set out the chronology of the case in

unusually excruciating detail, as follows.

1"Precisely because the substantive claims are so weak, and the opinions are therefore unpublished, litigants may be unaware of our practice. The routine use of sanctions does not deter unless people know what lies in store." Coleman v. Commissioner of Internal Revenue, 791 F.2d 68, 72 (7th Cir. 1986).

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Date

Event

January 5, 2007

Defendant Zanzola signs a promissory note to borrow $100,000 from Parkway Bank & Trust Company (Parkway). The note matures six months later, on July 5, 2007. The note provides that Zanzola will be responsible to pay Parkway's attorney fees, court costs, and expenses, including for appeals, if Zanzola fails to repay the note on time. The note states that it is secured by a January 5, 2007 mortgage, assignment of rents, and "commercial security agreement" between Zanzola and defendant Korzen for property located at 1527 East Thomas Street in Palatine (the property). The note was thereafter renewed in like form for six successive six-month terms, the last terminating on July 5, 2010.

January 5, 2007

Zanzola and Korzen sign a mortgage on the Thomas Street property with Parkway. The mortgage contains a standard "due on sale" clause providing that Parkway may declare the note immediately due and payable if the mortgagors transfer any of their interest in the property. The mortgage also provides that if the note is not paid on time, Parkway may obtain a court order foreclosing the mortgagors' interest in the property. Like the note, the mortgage provides that the mortgagors shall pay Parkway's "reasonable" attorney fees and court costs "at trial and upon any appeal."

January 5, 2007

In the mortgage, Zanzola and Korzen waived their rights of redemption and reinstatement in case of a foreclosure, a waiver which is only valid if the property is not "residential" as defined by the Illinois Mortgage Foreclosure Law (Foreclosure Law) (735 ILCS 5/15-1101 et seq. (West 2010)). Under the Foreclosure Law, the property is only "residential" if the borrower actually lives in a residence constructed on the property. 735 ILCS 5/15-1219 (West 2010).

Zanzola and Korzen sign an assignment of rents in favor of Parkway, another act which suggests that the property is not "residential" under section 15-1219 of the Foreclosure Law.

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January 22, 2007 August 26, 2010

Korzen signs and records a deed quitclaiming his interest in the property to himself and Zanzola as joint tenants. Korzen signs a certificate with the deed asserting that the transaction between Zanzola and him is exempt from real estate transfer taxes.

Parkway files this mortgage foreclosure lawsuit, along with a civil cover sheet indicating that the property is "vacant land." The lawsuit names both Korzen and Zanzola as defendants.

The lawsuit contains two counts. Count I seeks a mortgage foreclosure and follows the standard statutory format. Parkway attached three exhibits to the complaint to support its allegations in count I: (a) a copy of the January 5, 2007 promissory note, whose most recent renewal matured on July 5, 2010; (b) a copy of the January 5, 2007 mortgage; and (c) a copy of the January 5, 2007 assignment of rents. Count I, paragraph 3, alleges that the default on the note and mortgage occurred through failure to pay amounts due under the note on and after March 8, 2010, and that the amount currently due is about $106,377.23 plus continuing per diem interest of $28.39.

Count II is a claim for breach of the promissory note against Zanzola.

September 1, 2010 The circuit court appoints a special process server to serve defendants.

September 12, 2010 The special process server personally serves Zanzola at an address in Prairie Grove, McHenry County, Illinois.

September 14, 2010

The Cook County sheriff's deputy assigned to serve defendants reports that he could not serve Korzen at 410 South Warner in Palatine, because he moved from that address "five years ago."

October 20, 2010

Both defendants file motions in the circuit court to defend as poor persons without paying filing fees. The court grants the motions.

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October 28, 2010

Zanzola files an appearance, listing his Prairie Grove address; Korzen also files an appearance, listing an address in Chicago. The two defendants jointly file a fill-in-the-blank form answer, denying the allegations of count I, paragraph 3, of the complaint, and claiming that they have insufficient knowledge to admit or deny count I, paragraph 2.

Under the portion of the answer labeled "Other affirmative matter," defendants state the following:

"Missing:

4.1 Proof of claim accompanied with the evidence of debt; 4.2 Original Wet Script ink Promissory Note; 4.3 Original Title; 4.4 Current complete copy of the Bank's Original Application and the CUSIP number of the Application."

January 31, 2011

The special process server personally serves Korzen at his address in Chicago.

February 22, 2011 Defendants fail to appear for the case management conference.

August 16, 2011

Parkway issues a request to admit facts to defendants, seeking admission of various basic facts regarding the transaction. These include genuineness of the documents signed by defendants and the default created by the missed payments.

August 31, 2011

On Parkway's motion, the circuit court strikes the affirmative matter contained in paragraph 4 of defendants' answer. Defendants never amended these statements, nor filed traditional affirmative defenses at any later date.

September 15, 2011

Korzen recasts the "other affirmative matter" material which the circuit court struck from his answer and files it as a request for production of documents on Parkway. Included in the request is a demand for an "Original Wet Script ink Promissory Note [sic]."

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October 12, 2011 December 7, 2011 December 8, 2011 December 15, 2011

Parkway responds to defendants' request for production of documents, acknowledging that Parkway will produce the original note for inspection. Parkway responds to the other requests by generally stating that they held no responsive documents or that the requests were vague.

Parkway presents a motion for summary judgment which relies, in part, on defendants' failure to respond to Parkway's request to admit facts. Defendants file a written motion for a continuance on Parkway's motion for summary judgment.

The circuit court grants a briefing schedule on Parkway's motion for summary judgment, and sets hearing on the motion for February 9, 2012. The court also orders Parkway to produce the original note for inspection at its office by December 29, 2011.

Parkway's attorneys send Zanzola and Korzen letters stating as follows:

"This letter will serve to confirm our telephone conversation earlier today. You previously requested that Parkway Bank produce the original Note at issue in the above-captioned case for inspection by you at a Parkway Bank location. As discussed in our telephone conversation, Parkway Bank shall produce the Note for your inspection upon setting up an appointment with your loan officer.

Your loan officer is Loukas Rogaris. Mr. Rogaris can be reached at [phone number]. The Order entered on December 8, 2011, requires that you inspect the original Note by December 29, 2011, so please be sure to contact Mr. Rogaris promptly.

Please feel free to contact me should you have any questions."

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January 4, 2012 January 12, 2012 January 19, 2012

Defendants file responses to Parkway's request to admit facts, about four months late. Defendants' response includes a request to "toll the statute of limitations." The response is laden with objections and nonsense legalistic jargon. The record does not indicate that defendants ever: (1) requested a conference pursuant to Illinois Supreme Court Rule 201(k) (Ill. S. Ct. R. 201(k) (eff. July 1, 2002)) to resolve the objections; (2) filed any motion to request a ruling on the objections; or (3) filed or presented a motion asking the circuit court to extend the time to respond to the request to admit facts. See Ill. S. Ct. R. 216(c) (eff. Jan. 1, 2011) ("Any objection to a request or to an answer shall be heard by the court upon prompt notice and motion of the party making the request.").

Defendants file a pleading objecting to Parkway's motion for summary judgment. In the objection, defendants refer to themselves as "alleged defendants." The only point raised in the objection is that the alleged failure of Parkway to produce the original note for inspection creates a material issue of genuine fact preventing summary judgment. The objection is unverified. It contains no supporting affidavit, nor it is executed under section 1-109 of the Illinois Code of Civil Procedure (Code of Civil Procedure) (735 ILCS 5/1109 (West 2010)). In particular, the objection also contains no affidavit pursuant to Illinois Supreme Court Rule 191(b) (Ill. S. Ct. R. 191(b) (eff. July 1, 2002)), explaining why the lack of the original note prevented them from fully responding to the motion for summary judgment.

Defendants also file a similar pleading objecting to Parkway's motion to default unknown owners and nonrecord claimants, even though they have no standing to do so since that motion was not directed against them.

Parkway files a reply in support of its motion for summary judgment. The reply asserts that Parkway's attorneys sent defendants a letter on December 15, 2011, offering defendants an opportunity for them to inspect the original notes by making an appointment to see them at Parkway's office (not its attorneys' offices). It also states that defendants admitted all the relevant facts by failing to timely respond to plaintiff's request to admit facts.

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February 7, 2012

February 9, 2012 February 16, 2012 February 22, 2012

Defendants file a motion to dismiss the case with prejudice, based on Parkway's alleged failure to respond to the demand to produce the original note. The motion consists merely of fact-based assertions, and is not accompanied by any affidavit. In the motion, defendants admit receiving the December 15, 2011 letter from Parkway, but state that they left messages to establish an appointment to which Parkway did not respond. In particular, defendants assert that when they did reach a representative of Parkway on January 19, 2012, he incorrectly claimed that Parkway had until February 9, 2012 to produce the note. The record does not show that defendants scheduled this motion for hearing on any particular date, nor that they ever visited Parkway to view the original note.

The circuit court grants Parkway's motion for summary judgment of foreclosure and orders that the property be sold at auction to satisfy the debt. The order finds that defendants waived their rights to redeem the property pursuant to section 15-1601 of the Foreclosure Law (735 ILCS 5/151601 (West 2010)), which indicates that the property is nonresidential. The order contains no language pursuant to Illinois Supreme Court Rule 304(a) (Ill. S. Ct. R. 304(a) (eff. Feb. 26, 2010)) indicating that the order is final or appealable.

Defendants file a notice of appeal from the February 9, 2012 order of foreclosure, which is premature because such orders are interlocutory and not appealable until the court has confirmed the sale. EMC Mortgage Corp. v. Kemp, 2012 IL 113419, ? 11. The appeal is assigned docket number 1-120556 in this court.

Parkway's attorneys send a letter to defendants, advising them that their notice of appeal is premature. The letter cites two precedential cases so holding, and requests that defendants dismiss the appeal. If they do not, the attorneys state that they will file an emergency motion to dismiss the appeal and seek sanctions against them under Illinois Supreme Court Rule 375 (Ill. S. Ct. R. 375 (eff. Feb. 1, 1994)).

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